The SEC recently announced the formation of a Microcap Fraud Task Force (see announcement at: http://www.sec.gov/news/press/2013/2013-121.htm). Although the SEC did not associate the formation of the task force with the recent passage of the JOBS Act, given the concerns raised by many investor protection and consumer groups, it would seem that this enforcement initiative may be timed to coincide with the availability of alternative capital-raising techniques that may be employed by microcap companies. The SEC announcement noted that the task force will focus on abusive trading practices and fraudulent conduct relating to the securities of microcap companies. The announcement noted that the abuses relating to microcap companies often "involve serial violators and organized syndicates that employ new media, especially websites and social media, to conduct fraudulent promotional campaigns and engage in manipulative trading strategies to amass ill-gotten gains, largely at the expense of less sophisticated investors." The task force will focus on the activities of attorneys, auditors, broker-dealers, and transfer agents, and other intermediaries that work with microcap companies.
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
© Morrison & Foerster LLP. All rights reserved
